Did you know that Warren Buffet still lives in a house he purchased in 1958 for $31,500?
While the list of wealthy people with frugal spending habits is long, there are obviously also wealthy people who own 75 cars but never get behind the wheel.
But what about all this wealth? Where’d it come from?
It’s been my experience that most wealthy people aren’t big earners so much as they are consistent savers.
Here’s an example: At a 5% annual rate of return, if you put away a mere $250 per month, at the end of 40 years, you’d have more than $380,000. Quadruple that monthly deposit, and you’d be considered pretty well off by many Americans.
What other things do wealthy people do to attain and maintain their wealth? Here are four that I find particularly interesting.
1) Wealthy People Budget and Plan
Wealthy people not only know where their money goes, they tend to live within their means. And that “means” budgeting, which, not coincidentally, is one of the key aspects of both planning for retirement and making your money last.
Here are 4 basic steps to help you start to budget:
- Articulate (What goals would you like to accomplish?)
- Compile (Gather 3 months of receipts.)
- Examine (Where are you wasting money?)
- Create (A reasonable budget and stick to it.)
2) Wealthy People Are Generally Frugal and Look for Bargains
Here’s an interesting fact: According to a survey of over 4,000 millionaires, roughly 50% have never paid more than $100 for a pair of shoes. What else did the survey reveal about the personal spending habits of wealthy people?
- 36% drive a car that is more than 3 years old
- The average amount paid for a new suit? $399
- The average amount paid for a watch? $249
- Only 5% of millionaires admit to having purchased a lottery ticket
Clearly, unlike their depiction in popular culture, while the occasional splurge can be healthy, wealthy people typically aren’t consumers of things they don’t absolutely need.
3) Wealthy People Create Numerous Revenue Streams
You ever notice how the minute someone becomes famous, they almost immediately sign a book deal, start a clothing line, become a recording artist, and begin endorsing products and giving paid appearances? This is a form of revenue stream diversification, and it’s usually achieved when marketable people choose to work with a savvy management company.
Now, have you noticed how most lottery winners are bankrupt inside of five years? They win the Powerball and the first question they get asked is: “How are you going to spend your money?”
Cars, houses, vacations and jewelry. Most of these folks have no financial education and have likely never had a healthy relationship with money.
You may not be a movie star, but you obviously have more in common with a rising, hard working actor than you do a lottery winner. That’s because you’ve worked throughout your life and it’s likely you understand that money coming in from as many sources as possible is a very good thing.
Work with an advisor to create, manage and maximize as many of these revenue streams as you can:
- Capital gains
- Gig income
- Social Security
- Rental income
- Business income
4) Wealthy People Solicit Professional Financial Advice
82% of millionaires utilize the services of at least one financial advisor.And when you consider the number of millionaires who are in the banking and financial sectors, it’s pretty safe to say that, of the 18% who don’t, most of those probably have a lot of experience managing money.
There are no silver bullets to prosperity. Save, budget, plan, invest, repeat. And call your advisor if you have questions about creating (or updating) your personalized financial plan.